Transfer of Property Act • Official Statutory Text & Practice Guide
Statutory Regulation
Legal Standard
Competent Court / Tribunal
Act 1882
Section 134 of Transfer of Property Act: Mortgaged debt
Official Bare Act Text
Override / Mandate Mens Rea (Intent) Actus Reus (Conduct) Punishment Limitation Monetary
Where a debt is transferred for the purpose of securing an existing or future debt, the debt so transferred, if received by the transferor or recovered by the transferee, is applicable, first, in payment of the costs of such recovery;
secondly, in or towards satisfaction of the amount for the time being secured by the transfer;
and the residue, if any, belongs to the transferor or other person entitled to receive the same.
Section 134 regulates mortgaged debts (pledge or hypothecation of actionable claims), providing for the collection and application of debt proceeds toward satisfaction of the loan.
Mortgage of Actionable Claim: Where a debt or actionable claim is transferred for the purpose of securing an existing or future debt.
Application Hierarchy: The transferee shall apply the money received: first, in payment of the costs of recovery; secondly, in satisfaction of the amount secured by the transfer; and thirdly, the residue, if any, shall be paid to the transferor.
Debt Factoring Framework: Forms the legal foundation for modern accounts receivable financing and book-debt hypothecation.
Key Landmark Precedents:
State of Haryana v. Narvir Singh, (2014) 1 SCC 105: The Supreme Court noted that Section 134 provides the statutory mechanism for banks enforcing hypothecation of corporate book debts.
Union of India v. Sri Sarada Mills Ltd., (1972) 2 SCC 877: Affirmed the fiduciary duty of the creditor to account for surplus collections under Section 134.
Courtroom Practice & Strategic Litigation Guidance:
Banks collecting mortgaged debts under Section 134 must maintain an escrow ledger and refund any surplus collections to the borrower after loan satisfaction.
Legal Commentary & Landmark Judgments: Section 134
Section 134 regulates mortgaged debts (pledge or hypothecation of actionable claims), providing for the collection and application of debt proceeds toward satisfaction of the loan.
Banks collecting mortgaged debts under Section 134 must maintain an escrow ledger and refund any surplus collections to the borrower after loan satisfaction.